KUALA LUMPUR (Dec 11):Airlines are expected to post a collective global net profit in 2014 of some $19.9 billion (up from the $18.0 billion projected in June), according to the International Air Transport Association (IATA).

In a stetement Dec 10, the IATA said the amount was set to rise to US$25 billion in 2015.

It said lower oil prices and stronger worldwide GDP growth were the main drivers behind the improved profitability.

The association said consumers would benefit substantially from the stronger industry performance as lower industry costs and efficiencies are passed through.

“The airline industry is highly competitive.

“After adjusting for inflation, average return airfares (excluding taxes and surcharges) are expected to fall by some 5.1% on 2014 levels and cargo rates are expected to fall by a slightly bigger 5.8%,” it said.

“On a per passenger basis, airlines will make a net profit of US$7.08 in 2015.

“That is up on the US$6.02 earned in 2014 and more than double the US$3.38 earnings per passenger achieved in 2013,” it said.

It added that the return on invested capital (ROIC) was expected to grow to 7.0%.

It said this was a substantial improvement on the 6.1% ROIC expected to be achieved in 2014.

“This is still 0.8 percentage points below the 7.8% weighted average cost of capital (WACC), so there is still some ground to cover before achieving sustainable margins,” it said.

IATA Director-General and CEO Tony Tyler said the industry outlook was improving.

He said the global economy continued to recover and the fall in oil prices should strengthen the upturn next year.

“While we see airlines making US$25 billion in 2015, it is important to remember that this is still just a 3.2% net profit margin.

“The industry story is largely positive, but there are a number of risks in today’s global environment—political unrest, conflicts, and some weak regional economies- among them.

“And a 3.2% net profit margin does not leave much room for a deterioration in the external environment before profits are hit,” he said.

Tyler said stronger industry performance was good news for all.

“It’s a highly competitive industry and consumers—travelers as well as shippers—will see lower costs in 2015 as the impact of lower oil prices kick in.

“Airline investors will see ROIC move closer to the WACC. And a healthy air transport sector will help governments in their overall objective to stimulate the economic growth needed to put the impact of the global financial crisis behind them at last,” said Tyler.